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As job crisis deepens, a do-nothing budget looms large

on Jan 13, 2014 at 1:22 PM Posted by Rick Smith

The job numbers for the end of 2013 could not have been much worse than this. But don't expect the Harper Conservatives to do anything about it in a February federal Budget which will be all about 2015 pre-election politics.

In December, the Canadian economy lost 60,000 full-time jobs, and the national unemployment rate rose sharply from 6.9 per cent to 7.2 per cent. The youth unemployment rate jumped from 13.4 per cent to 14 per cent.

While the Conservatives have bragged about the strength of the recovery, the proportion of Canadians with jobs was down in December from a year earlier, and the unemployment rate was up, from 7.1 per cent to 7.2 per cent.

In short, no progress was made in 2013.

The prospects for 2014 are not rosy. Most forecasters expect little improvement on the jobs front as the housing boom slows and households, now with record-high levels of debt, slow down their spending. The hard-hit manufacturing sector continues to shed jobs as new plant closure announcements multiply.

There is a lot that the federal government could do to help sustain and create jobs, especially for hard-hit young people and recent immigrants.

We could take advantage of still very low interest rates to finance major new investments in public and environmental infrastructure, including public transit, which would both create jobs and reduce carbon emissions.

We could invest in innovation, skills, and research and development to transition from our overreliance on resources to a more sophisticated Canadian economy.

We could lighten up on cuts to public services which kill jobs even as they harm Canadian families.

But the federal budget will do close to nothing along these lines since the Harper Conservatives have only one goal: to set the stage for pre-election tax cuts in the 2015 budget.

They can't cut taxes till they have balanced the budget. So this year, the order of the day will be no new programs, and even more cuts to jobs and services. Watch for new austerity measures on top of already announced cuts which will see federal direct program spending (program spending minus transfers to persons and minus transfers to provinces) fall by $5.3 billion from 2013-14 to 2014-15.

These deep cuts are being imposed in spite of the fact that the federal debt is already falling as a share of the economy. Even bank economists say that there is no particular hurry to eliminate our remaining modest deficit.

The race to balance the federal budget is motivated not by economics but by the political determination of the Conservatives to deliver a big personal tax cut just before the 2015 election in the form of income-splitting for families with children.

No one is against a break for hard-working families, or measures that would allow parents to spend more time with children – but is income splitting the way forward? We could, for example, expand parental leave benefits under the Employment Insurance program so more parents could afford to take up to a year off work after the arrival of a child.

But the Conservative proposal to allow a shift of up to $50,000 between partners in a family with children up to age 18 is deeply flawed.

There would be no benefit at all to the one in four children who live in single parent families, nor would there be much (if any) benefit to lower-income families with two earners where neither earns above the $50,000 needed to move out of the lowest tax bracket. Stephen Harper is essentially proposing that we transfer more of the tax burden onto single-parent and lower- and middle-income families.